INSURANCE GIANT AIG is entitled not to pay out under a professional indemnity policy issued to missing solicitor Michael Lynn and his overseas law company because of non-disclosure of legal undertakings on multiple mortgages that could not be honoured, the Commercial Court has ruled.
However, Mr Justice Peter Kelly deferred making formal orders against Mr Lynn and his company pending the outcome of separate proceedings involving another solicitor in his firm, Fiona McAleenan, who claims she is entitled to an indemnity under the policy.
AIG Europe (Irl) Ltd brought the proceedings against Mr Lynn and Ms McAleenan, trading under the style and title of Michael Lynn and Co, and against Overseas Legal and Tax Services Ltd, trading as Overseas Property Law, of the Capel Buildings, Mary’s Abbey, Dublin.
Ms McAleenan claims AIG is not entitled to “avoid” the policy and she is entitled to an indemnity under it for all claims being made against it.
AIG has agreed to a stay on its proceedings against Ms McAleenan pending the determination of her case, which is due to be heard shortly. Peter Lennon, for AIG, said in an affidavit that it may be necessary to establish in Ms McAleenan’s case her conduct and that of Mr Lynn was negligent and/or fraudulent in leading to the avoidance of the policy.
Yesterday, Mr Justice Kelly was asked to deal with AIG’s claims against Mr Lynn and the Overseas company. As neither party had put in any defence to the claims by AIG, the judge ruled AIG was entitled to judgment against Mr Lynn and Overseas but said he would make no formal orders pending the outcome of Ms McAleenan’s claims.
The judge noted Mr Lynn has made himself scarce for some time now and would probably remain so for some time to come.
Counsel for Ms McAleenan had urged that any orders made against Mr Lynn and Overseas should be without prejudice to her claims.
Niamh Hyland, for AIG, said there was no need for a caveat in the court’s orders as no issues were being determined given that no defence had been entered on behalf of Mr Lynn or Overseas.
AIG claims Mr Lynn and/or Ms McAleenan had in April 2007 signed a proposal form to place professional indemnity insurance with AIG under which they had a duty to disclose all material facts known to them.
It is claimed they knew, or ought to have reasonably known, that multiple loans had been raised on numerous properties on foot of legal undertakings given by Michael Lynn and Co for mortgages that would not be honoured.
This “systematic practice” was a material risk that would have influenced AIG in whether to accept the risk or in relation to fixing a premium, AIG claims. It agreed to provide insurance of €2.5 million for each and every claim.
AIG claims the defendants sought additional insurance in May 2007 for “dishonesty cover” and once again material information was not disclosed. AIG has argued it was entitled to lawfully avoid paying out on the policy.